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Recovery Loans Scheme Equiniti

Are You Ready For The Return Of The Recovery Loan Scheme?

03 August 2022

The Government’s Recovery Loan Scheme is set to return in August, releasing extra cash to SMEs keen to bounce back from the pandemic crisis. But while the scheme also provides opportunities for investors and lenders, it comes with risks that they will be keen to mitigate.

Owain Chambers of EQ Credit Services explains why best-in-class protection can only be provided through three steps: standby servicing, auditing and verification.

Owain Chambers Owain Chambers Product Owner - Standby Servicing, EQ Credit Services

Anticipation is building as to how the Government’s Recovery Loan Scheme (RLS) will shape up when it’s relaunched in August. Intended as a lifeline for SMEs struggling to secure credit as they endeavour to bounce back from the pandemic crisis, the business lobby is welcoming its return after its closure at the end of June. Of course, it also represents a commercial opportunity for the lenders and investors who bring the RLS to life – but there are risks to protect against.

Earlier this year, Treasury Minister Lord Agnew resigned over Government moves to write off £4.3bn of fraudulent loans acquired through the Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) – and that total is expected to rise considerably. The RLS, which succeeded the BBLS and CBILS, may be better protected against fraud, but it’s impossible to safeguard loans completely without the sort of specialist measures provided by EQ Credit Services.

We have been heavily involved in protecting investors and lenders since the first bounce-back scheme was launched, and we’re ready to step up again when the relaunch happens next month. Importantly, we offer something very different to others in the market. This is our three-step approach to protection:

1. Standby servicing

A fundamental element of lenders securing their accreditation and providing assurance to the British Business Bank (BBB) is to have a standby servicer in place for the facility being offered. We’re market leaders in this area, standing behind a large range of institutional investors in the UK and US – around 100 lines in all. We also have our own access to the BBB portal, enabling testing to ensure readiness for invocation.

2. Compliance audits

Equiniti Credit Services provides a wide range of bespoke auditing services (including data integrity, CCA compliance, underwriting, affordability, policy, default and forbearance). We are there for the investors to ensure the lender’s compliance to the RLS – and that guarantee also makes it easier for the lenders to gain investor support.

3. Verification

We also ensure that the information investors are receiving is an accurate reflection of what's in the database – and this is another area where EQ Credit Services stands out in the market. While other agencies may ask for a copy of data to be supplied on a regular basis for verification, we are plugged directly into the loan platform, giving us direct, immediate access, which clearly speeds up the process considerably.

Awaiting launch details

For now, we must wait to see the details of the relaunched scheme. When it was first launched in April 2021, it provided Government backing for 80% of the outstanding loan value in the event of the borrower defaulting. That was dropped to 70% when the scheme was extended in January 2022 and it remains to be seen what the threshold will be from August onwards.

The other changes initiated in the extension that ran until June this year were that the scheme was open to businesses with a turnover of no more than £45m per annum, with the maximum amount of loan finance set at £2m per business (or £6m per Group).

Find out more

EQ Credit Services currently protects more than £4bn of UK Government-backed loans. If you would like to discuss how we can help you protect loans once the RLS is relaunched – whether you are an investor or a lender, please get in touch.

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